The Myth of Government Budget Cuts (The Austerity Myth)

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We hear over and over that there are “big budget cuts” and that government budgets have been “cut to the bone” and that there is “nothing left to cut.” What is the truth behind government budgets? The cuts are a myth. And the idea that austerity hasn’t worked is pure fiction, because we haven’t had any austerity in the United States. Governments have continued to spend like drunken sailors, and cries of “nothing left to cut” are merely fraud on taxpayers.

The Milwaukee Public School system gives us an excellent example of this. For years we’ve heard about budget cuts and how individual schools are suffering. We hear about how teachers don’t have basic classroom supplies, and how “budget cuts” are leading to classrooms with 40 children.

The truth is that MPS has been increasing its budget year after year, both in terms of total dollars, and in terms of spending per child. In this article about the myth of school budget cuts, I summarized the annual budgets for MPS and calculated the spending per child.

As you can see below, 2011-2012 is the first year in many that MPS was looking at an overall budget cut. And the cut was only 2.45%. In the six years prior, the total annual budgets increased 0.61% to 8.5%. The total budget is still an astronomical $1.3 billion per year.

If you look at per student spending, however, you see that the budget has been increasing dramatically. In 2001-2002, per student spending was at $10,500. Ten years later, in 2011-2012, per student spending was $16,382. That is an increase of 56% in just 10 years.

In total, the feds spent 4.2% more in fiscal 2011 than in fiscal 2010. The biggest spending increases were for Medicare (3.9%) and interest payments (16.7%). Despite all the spending in 2009, 2010, and 2011, the economy hasn’t improved and unemployment hasn’t been reduced. So much for spending our way out of a recession.

This chart put together by WSJ is enlightening. Look at the massive deficits we’ve been racking up over the last 3 years. And again, you should be reminded that we’re not spending our way out of a recession. If government was the answer to an economy’s problem, why aren’t things better?

A July article in USA Today, for example, claimed that “Already in 2011, softer government spending has sapped growth.”

Jared Bernstein, former chief economic adviser to Vice President Biden, wrote over the summer that “government spending cutbacks have been a large drag on growth in recent quarters and have led to sharp losses in state and local employment.”

Economist and New York Times columnist Paul Krugman argued in September that “the turn toward austerity (is) a major factor in our growth slowdown.”

Maybe all the budget cutting went on at the state level? Nope. States spent almost 10% more in 2010 than they did in 2008, according to the National Association of State Budget Officers’ annual State Expenditure Report. Spending by states in 2011 is expected to be 5.2% higher than 2010, and in 2012 it is expected to rise another 2.6%.

This chart from Investor’s Business Daily illustrates state and federal spending well:

Now that we’ve had our reality check, can we stop all this mindless spending? There are plenty of places to cut budgets and we need to start doing it. Tell government to get out of our lives. If something is a good idea, let the private sector do it. Our government should strive to have a minimal amount of interference in our lives, with people being encouraged (nay, required) to support themselves (and their families). We need more personal responsibility and fewer [failed] government programs.

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2 thoughts on “The Myth of Government Budget Cuts (The Austerity Myth)”

jon

For the last 30 years, USA government spending has been out of control. Reagan tripled national debt, Bush doubled it, and Obama is about to increase the debt by 50%. The limit will soon be reached. It’s Insane.

There is no “limit” on the debt the government can incur; it will just print more money. The problem is for those of us on this end. We pay higher interest rates and inflation rears it’s ugly head. And we aren’t talking 10-12%…we’re talking 1980’s-style South American inflation to the tune of 50% and greater.